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brFERC-Ordered Capacity Zone would Increase Electric Rates in the Hudson Valley In Coming Months In order to Attract New Power Generators But Does So in a Way that Causes Immediate Harm to Residents without a Guarantee of More Power GenerationbrbrbrSchumer Demands that FERC Undo Order, Which Would Increase Rates by Up to 10%, After Rehearing There is No Proof That New Zones Are Necessary Given In-Progress Energy UpgradesbrbrbrSchumer: New Capacity Zone Lines the Pockets of Power Providers and

Today, at Poughkeepsie City Hall, U.S. Senator Charles E. Schumer urged the Federal Energy Regulatory Commission (FERC) to undo an order that would unfairly hike electric rates in Ulster and Orange Counties in the coming months, given that consumers have endured a brutal winter of high energy costs and that the new zone may be unnecessary given inprogress energy upgrades. In January, FERC reapproved a proposal by the New York Independent System Operators (NYISO) - which operates and administers New York's transmission network - to create a new capacity zone in Ulster and Orange Counties, and elsewhere in the Hudson Valley, that raises electric rates in order to attract new power generation. In some areas, these rate hikes could be as high as 10%. Schumer said that the FERC order was wrongheaded, fails to adequately protect residential and business consumers and is demanding that, in their second rehearing, FERC should overturn their initial decision based on several considerations.

"After a winter of high energy costs and electric rates, it adds insult to injury that Ulster and Orange County will soon have to face rate hikes as a result of this new capacity zone. There are many ways to increase the amount of power we can deliver to the Hudson Valley - our first option shouldn't be doing it on the backs of consumers. What's worse, these rate hikes are like a shot in the dark; there is simply no guarantee more power will be created," said Schumer. "FERC must rehear their order and undo rate hikes that will be like a doublewhammy to Hudson Valley residents after such a long and extreme winter."

Schumer explained that he supports a variety of strategies to alleviate the demand for more power in the Hudson Valley, but underscored that the FERC order goes about it in the wrong way. Schumer declared his opposition to the new capacity zone, which would line the pockets of power producers and unnecessarily hurt Ulster and Orange County residents before any substantive increase in power generation.

Last year NYISO proposed, and earlier this year, FERC approved, a new capacity zone in the power grid that stretches from New York City to Albany that would raise rates in an attempt to lure new power generators to the Hudson Valley. The initial NYISO proposal, approved by FERC last August, raised the tariff on the new capacity zone by $350 million dollars annually. After a subsequent rehearing, FERC approved the order again in January, this time with an annual tariff of $230 million, which Schumer said is still unacceptable. Currently, there is a surplus of cheaper power generated in Upstate New York that does not reach energyneedy areas in the Hudson Valley and New York City in an efficient manner, due to a transmission bottleneck near Albany.  The new zone would effectively impose a tariff on the entire region with this FERCapproved annual increase of $230 million. Initial estimates suggest that customers in Ulster and Orange Counties could see increases of between 5 and 10%. The New York State Public Service Commission (PSC), the New York Power Authority (NYPA) and towns throughout Ulster and Orange County are also fighting the impending rate hikes.

Schumer said he wholeheartedly supports finding new energy sources for Hudson Valley residents, but he does not support doing so on the backs of ratepayers if, as in this case, other options exist to deliver the needed power more efficiently and cheaply.  Schumer expressed concern these large rate hikes could have on small businesses, employers and residents throughout the Hudson Valley who are just coming off of a long winter where record low temperatures drove up energy costs. For many companies, such a large spike in energy costs could decrease job creation and expansion efforts at a time when the local economy is on track for economic growth.

Schumer pointed out that several other options exist to increase the amount of power entering the Hudson Valley before rate hikes should even be considered. For one, transmission upgrades proposed by the New York State Energy Highway program, which are approved by the PSC and set to go online in 2016, are specifically designed to deliver power around the bottleneck in Albany to Hudson Valley customers. Energy conservation and efficiency efforts, and the retrofitting of existing businesses that use a lot of power, are much cheaper and far less painful solutions to the energy shortage. Schumer explained that it made no sense to jackup the rates on residents now, before other efforts could be undertaken and completed first.

Schumer argued that the current proposal does a great injustice to Hudson Valley residents and businesses by immediately raising rates without any guarantee of power generation. As it stands, Hudson Valley consumers would see a large increase in rates even before prospective energy developers could movein and help increase power generation to drive down costs in the long term.

The new capacity zone is set to take effect on May 1 st, and Schumer is asking FERC to undo the order and reject the proposed rate increases before they take effect.

A copy of Senator Schumer's letter to FERC appears below:

Dear Chairman Cheryl LaFleur,

As I am sure you are aware, the Federal Energy Regulatory Commission (FERC) has issued an order approving the New York State Independent System Operator (NYISO) proposal to create a new capacity zone (NCZ) on May 1 st 2014, which will affect Dutchess, Orange, Ulster, Rockland, and Sullivan Counties in New York. The initial NYISO proposal, approved by FERC last year, raised the tariff on the new capacity zone by $350 million dollars annually. After a subsequent rehearing, FERC approved the order again, this time with an annual tariff of $230 million. This new order is also unacceptable to me, the New York State Public Service Commission (PSC), and to residents and businesses throughout the Hudson Valley who feel aggrieved for having to pay immediate rate hikes after a record winter of high energy costs. The New York State Electric and Gas Company - one of the largest utilities in the Hudson Valley - has estimated that its average February electric bill will be 12 percent higher than December's bill.

While the goal of this capacity zone is to attract new power generation, it unfairly raises utility rates on the backs of Hudson Valley residents in effort to attract new energy developers - and there is no guarantee this will create more power generation. FERC, in their rehearing of this order, must undo these rate hikes. I urge you to restudy the need for a new capacity zone in light of the ongoing capacity upgrades that will be generated by the New York State Energy Highway Blueprint projects. Furthermore there are a variety of other alternatives to increase capacity in the Hudson Valley to create more power in the Hudson Valley without raising the rates of consumers: including energy conservation and efficiency efforts, like the retrofitting of existing properties, and further transmission and delivery upgrades.

We have received an outpouring of concern from local residents, the NYS Public Service Commission (PSC) and the New York Power Authority (NYPA), who all agree that this order does not adequately protect consumers and should be reheard. I am urging FERC in their rehearing to redo the order and undo these rate hikes.

As we both know, this winter has brought extreme low temperatures, and consequently high energy costs, to everyone in New York. Imposing an additional cost increase on Hudson Valley residents is unfair and will place an undue burden on many of my constituents. Given these conditions, I request that in the rehearing of the order for a new capacity zone, FERC considers prominently the burden they are placing on consumers with this additional tariff.

Thank you for your attention to this matter. Should you have any questions please do not hesitate to contact me or my staff.



Charles E. Schumer

U.S. Senator